Review of the accounting entries and financial flows

Type: Financial investigation
Sector of activity: Industry
Size (sales in €m): Confidential

Context

The group operates on the mechanical parts manufacturing sector

  • A new shareholder bought into the group in 2012, taking an initial stake of 40% before completing a full takeover
  • Since 2011, the group has been faced with increasing cash flow problems
  • Against this backdrop, the operational entity resorted to mobilization of trade receivables from June 2011 to October 2012, as well as factoring
  • Meanwhile, a former senior executive and shareholder left the group in mid-September 2012, amid questions about his management of the group

Our mission

  • Identification and documentation of entries boosting earnings, during the last closure of accounts used as the basis for the new shareholder’s buy-in
  • Analysis of the operating entity’s practices related to the mobilization of bills and factoring in the period from September 1, 2011 to December 31, 2012
  • Historical analysis of bonuses and benefits granted to personnel along with fees paid by these entities for the period from September 1, 2011 to December 31, 2012
  • Review of the status of current accounts on December 31, 2012 for all entities

Results

  • Evidence of entries intended to artificially boost the earnings of certain entities which, once corrected, caused the financial results of certain entities to move from profit to loss
  • Demonstration of multiple use of receivables by the group’s largest operational entity
  • Demonstration of significant amounts of exceptional bonuses, increases in salaries and fees

Key success factors

  • Adaptation to a difficult context for working within the company since the accounting contacts were reluctant to share information
  • Analysis of information communicated to shareholders and its possibly misleading nature
  • Precise and clear documentation of the facts that enabled negotiations to take place